Legal Updates

New pressures on HR from supply chain risks

Convergence of various developments will pull over stretched HR more towards how to manage and monitor supply chain issues, especially when contracting with overseas countries that have a high risk profile for workforce practices that offend international standards and UK corporate values.

The Modern Slavery Act adds fuel to a fire already lit by the various international ethical standards and guidelines that multinationals disregard at their peril.

There will be close scrutiny of the statements large corporates publish about their compliance with the Act, and statements by different companies will be compared and contrasted. There is going to be no hiding place from attention if companies are found wanting or not as good as their main competitors, and of course that leads to reputational damage and impact on the bottom line as consumers vote with their feet.

The challenge is developing a mix of tools to address workforce risk issues, including a holistic approach from procurement, assessing local and country risk profiling through contractual terms addressing labour practices, introducing more collaborative models of working between companies and suppliers and active monitoring of compliance.

Multinationals are aware of the growth and influence of global unions who watch the ways that employees are treated and paid, especially in some high risk countries. The combination of unions, media, legislation, and investor expectations of values in business, all makes the task of managing the long supply chains that some multinationals rely on almost impossible to handle free of risk.

Even if corporates can successfully deal with standards of health and safety and workplace good practice in their immediate suppliers, the challenge is how far down the chain can the corporate buyer go to see that there is no infringement of human rights such as, for instance, forced or child labour where raw materials are sourced.

The impact of bad practice on the environment will also get added on to the list of risks that have to be addressed, and as time passes the disclosure of harm being done becomes ever more probable. At the minimum those watching closely may begin to pick up on excess use of precious resources like water in manufacturing. The winners will be the corporates who think ahead of the issues without waiting to be told or, worse, taken to task in public. Sustainability is the name of the game in future and this will go for all of workforce management, environmental protection, and economics in a world where natural resource will become increasingly limited and/or costly.

The global connectivity of social media, international news reporting, trade unions, NGOs, and other sources of public protest or pressure, all add up to a world in which little can probably remain hidden long where harm is being done to people or the planet, or indeed to other species vulnerable to changes imposed by commercial interests on their environment.

For further information about this or any other Outsourcing & Supply Chain matter please contact Clarkslegal's outsourcing & supply chain team by email at contact@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

Disclaimer

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.